Court Strikes Down 340B Orphan Drug Discounts

Court Strikes Down 340B Orphan Drug Discounts

Rural Referral Centers, Critical Access Hospitals, Cancer Centers, and some Children’s Hospitals will no longer be able to purchase orphan drugs at 340B prices, even if the application of those drugs is for non-orphan conditions.  Prozac, for example, is classified as an orphan drug for its treatment of body dysmorphic disorder, although its typical application is for depression.  This week’s ruling means that Prozac and all other listed drugs must be completely excluded for these covered entity categories.

What Does This Mean?

Many Critical Access Hospitals we’ve worked with have already been excluding all drugs indicated as orphan without regard to the conditions being treated.  The new ruling requires all entities subject to the exclusion to do the same.  This means that ultimately fewer drugs will be considered eligible, including many common drugs.  This also means, however, that identifying patient conditions when identifying 340B eligibility will no longer be necessary for orphan drugs.

What Happened?

HRSA had issued a “Final Rule” that, according to its interpretation of the 340B statute, drugs identified as orphan but when not used for the specified orphan conditions should not be excluded under the definition of “covered outpatient drug”.  This rule was challenged by pharmaceutical manufacturers by claiming that HRSA did not have statutory authority to make a rule on this issue.  HRSA lost that challenge, and reissued the rule as “guidance”.

This week that guidance as well was overturned based on a lawsuit from manufacturer trade group PhRMA.  A Federal judge agreeing that HRSA’s guidance conflicts with the “plain language” of the statute.

HRSA has already posted information on the vacation of the ruling.

Cirrus is recommending to all customers subject to the orphan drug exclusion that they immediately disqualify all orphan drugs from 340B purchasing.

References:

The court ruling: https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2014cv1685-29

HRSA’s post on the ruling: http://www.hrsa.gov/opa/programrequirements/orphandrugexclusion/